In this post, I’ll highlight the trends on the state of the BPO industry that we can look out for in 2018.

Trend 1 – New Technologies are Emerging

Over the years, the business process outsourcing industry has been providing businesses with cost effective solutions.

Emerging technologies such as cloud computing, social media, software and automation are being used by BPOs to reduce costs and accelerate growth. This trend will continue in 2018.

Here are the three major trends expected to emerge in BPO technology in 2018.

1. Emphasis on Process Automation

New technologies that have emerged over the past few years including robotic process automation (RPA) have begun to impact the BPO industry.

Essentially, the work that gets outsourced to remote locations is the bottom-of-the-pyramid work, and as automation capabilities advance, those processes are becoming ripe candidates for removal.

RPA with its cost savings, speed and efficiency is slowly making its way into all industries and all types of business processes. This will have a major impact on how BPOs operate and lead to jobs losses.

Expanding enterprises do not want to hire thousands of people for small tasks such as processing insurance claims, data entry, and so on, as these tasks can be easily handled by computers.

Enterprises and service providers are adopting more tools that aid automation. With customizable software, cloud based tools which promote automation, the low skill sectors of the BPO are at high risk.

India’s BPO industry workforce is expected to shrink by 14% in 2021. On the plus side, automation can make way for more higher-skilled employees. In the Philippines, around 700 thousand medium and high skill jobs would be created by 2022.

While it is an uphill task for many BPO service providers, the top players in the industry are already working today to make robotic process automation part of their standard client services portfolio.

This is important because automation is something that is accessible to the customers of BPO service providers. Vendors or third party advisors can easily support the creation of onsite shared services teams to establish internal capabilities for robotic process automation. Therefore, if an outsourcing firm is unable to provide cost efficiencies that come from automation, its client may readily develop the process in-house.

This trend will dominate in 2018 and outsourcing companies will automate more processes to bring innovation to existing clients, improve productivity and regain a labor cost advantage.

2. Focus on Social Media Management Tools

Before 2000, the customer service industry was entirely dependent on websites and Interactive Voice Response (IVR) for transferring a call to the correct representative.

Now, around 81% of the U.S. population has at least one social media account, leading to a major shift in consumer behavior. Browsing social media has recently become the third most popular online activity.

Companies now realize that social media is a game changer. It provides an unprecedented wealth of consumer data and feedback that can enhance a company’s ability to analyze upcoming trends and to innovate.

Instead of call centers, companies now want to invest in real-time customer engagement that will allow them to gain first-hand product insights and turn issues into new products or solutions that will address future problems.

According to Credo Consulting, consumer demands for multi-channel communications (including social media, live chat, etc.) has exploded over the past 5 years.

For BPO service providers, this change in customer management is a huge opportunity. Over the last few years, BPOs have been investing in the tools and capabilities to offer a wide range of social media management services.

These services range from social media monitoring to business intelligence and actioning customer response.

Many BPO service providers are also investing in dedicated social media service teams. Working in tandem, social media teams and customer representatives are able to deal with customer grievances much faster.

In 2018, this trend to invest in new technologies, tools and teams to provide better social media management for customers is expected to continue.

3. Investments in Cloud Computing

Small and medium businesses have a limited budget which is unable to grant them state of the art office space and infrastructure. More and more SMBs are adopting virtual storage and systems to counter a lack of data centers, hardware and software, and the personnel required to implement new technology.

Flexibility and scalability – the two advantages cloud-based BPO offers to SMBs will continue to be important for SMBs in 2018.

Therefore, adoption of cloud services and investments by top outsourcing companies in this technology will continue in 2018 as cloud computing becomes more mainstream, mature and cost effective.

Trend 2 – Multitasking to Overcome Skill Shortage

25 years ago BPO was synonymous with call centers. This outdated notion has been replaced with accounting, human resources, web design, coding and other tasks.

A huge chunk of BPO organizations have been investing in new technologies in their supplying countries. Due to increasing levels of skilled work, 52% of businesses are concerned about skill shortage in the BPO industry.

BPO powerhouses like India and the Philippines have also been facing a skill shortage over the past few years.

NASSCOM (The National Association of Software and Service Companies), has expressed its concerns over the lack of a high skilled workforce in the Indian BPO sector to tackle high-end services.

In the Philippines, there is a growing demand for financing and accounting personnel, and experienced middle managers. Much to the annoyance of the BPO company leaders, their only solution is to hire middle managers with around 5 years experience.

Demand in high-skill operations is due to the industry’s need to reduce prices for routine services. High competition has forced BPOs to invest in lower costing alternatives such as AI and automation. The threat of losing low skilled workers to automation has compelled governments as well as business leaders to educating their workforce to meet these demands.

As a result of this, BPO companies like Capgemini have made it their mission to impart more skills to their current employees. Capgemini is investing in training and development as they plan to re-skill around 45,000 existing employees to prevent loss of labour due to automation.

Trend 3 – Startups becoming BPO Customers

The past few years have seen a huge surge in startup growth. Startups are under a lot of pressure to succeed under time constraints with limited resources.

Companies such as Slack, AppSumo and Klout have used the talent outsourcing model to build their successful business ideas.

Startups and BPOs have become more mutually dependent and this trend will become more pronounced in 2018.

Startups rely on BPO for providing talent at lower costs, completing tedious tasks such as recruitment and trading. This in turn helps outsourced businesses improve their quality of work, utilize most recent technologies and produce greater revenue.

Trend 4 – Increased Transparency

In the past, only large multinational BPO companies were an active part of the industry.

It was really difficult to get information about the policies and contracts during this time. Most employees on the client side were in the dark about technology stack, plans, challenge areas, and other processes.

The supplier side employees were not fully informed about their organizational structure, capabilities, investment areas, etc.

The introduction of smaller businesses, has urged the BPO industry to increase transparency and reveal their policies, contracts and pricing.

A high level of transparency is required to maintain trust between BPOs and vendors.

Due to the highly competitive environment, many organizations have to adjust their policies to prevent them from losing business to more trustworthy organizations.

Transparency also results in better partnerships between clients and suppliers, which is required for business innovation and better investment options (due to access to information).

Government intervention has been a catalyst to the increased demands in transparency. Recently, the UK government has stated that steps will be taken to make sure there is transparency about outsourced services in response to requests for information.

Other countries are also expected to come out with more transparency policies for the outsourcing industry over the next few years.

Trend 5 – Politics to Affect Investments

After the 2016 US Presidential election, many BPO companies watched with bated breath as the new administration coming to power would have a direct impact on trade, tax policies, visas, agreements and regulations.

Experts were initially uncertain on how the outsourcing sector would be affected due to President Trump’s focus on “Buy American, Hire American”.

Trump’s “America First” policy has encouraged the return of anti-outsourcing bills in Congress, despite the failed attempts of the same under the Obama administration.

The proposal of these bills can cause a stir within the Philippines which recently received $25 billion in BPO revenue from the US.

Coupled with President Duterte’s drug war and anti-western stance, many companies are concerned over safety in the Philippines. This had lead to longer negotiations between US companies who are apprehensive about the country’s political stability.

The delay in new countries entering the market also reflects on the processing of new economic zones and infrastructure in the Philippines.

Despite Trump’s new policy claims, the Asian BPO Industry continues to expect unstoppable growth. Philippines expects a growth rate of 6.5-7.5% by the end of 2017.

According to the Philippine IT-BPM Roadmap 2022, the industry is expected to reach around $38.9 billion, continuing to be a huge contributor to the global BPO sector.

Trend 6 – Continued Growth in Top Outsourcing Countries

Established outsourcing destinations like India, the Philippines and Malaysia will continue to see growth in 2018, coupled with a few challenges.

1. India

According to the National Association of Software and Services Companies (NASSCOM), the IT and BPO trade body in India, a total of 1.1 million people work in the Indian BPO industry. 500 companies in India offer outsourcing services to over 66 countries. About 200 multinational corporations operate out of India.

The IT-BPO industry grew by 8 percent leading to an aggregate revenue of $154 Billion for 2017. The BPO sector contributes 7.7 percent to India’s GDP.

Future Opportunities

The emergence of new job roles such as cybersecurity, mobile app development, social media, data science mobile app development has reduced the economy’s reliance on call centers.

Robotic process automation (RPA) has begun to taken over simple jobs. Foreseeing the increase of RPA, the Indian BPO sector has prepared to re-skill their workforce.

NASSCOM estimates up to 40 percent of India’s IT-BPO workforce would upgrade their skills over the next five years. Emerging skills that will be in high demand include robotics, big data analytics, artificial intelligence and machine learning.

Predictions

With an expected growth rate of 7-8% for export revenues by 2018 and an additional 130,000 new jobs, digital adoption will help increase the subsectors in the BPO industry.

2. Malaysia

Malaysia, while very competitive as a location for global business services, accounts for only 1.7% of the total market in the Asia-Pacific region. Malaysia is the 3rd most desirable country for BPO locations due to it’s strong business environment compared to its counterparts – India and China.

Future Opportunities

According to David Wong, chairman, Outsourcing Malaysia, business process outsourcing will surpass information technology outsourcing (ITO) in the next few years. He adds that there is a growing investor interest in Malaysia’s shared services market and the local industry would have to quickly adapt to this demand.

Predictions

Malaysia’s business process outsourcing market is predicted to reach 1.4 billion and grow at a compound annual rate of 7.9% by 2021.

3. Philippines

The Philippines has overtaken India as the leading call center country. This subsector contributes around 10% to the country’s economy.

Expanding BPO operations outside of the capital Manila to other provincial regions such as Cebu and Davao was a key factor for the country’s recent growth. However, the reduction of tax holidays for the BPO industry may deter foreign companies to enter the Philippines market in the coming years.

Future Opportunities

After BPO, the emergence of KPO (Knowledge Process Outsourcing) sector can cater to new demands and offer more specialized roles such as equity research, market research, web design, and development, etc. This will be a sector to look out for in Philippines in 2018.

Predictions

Experts predict that by 2018, BPO services may become the primary source of revenue for the country. The industry is also expected to grow 9% annually for the next five years. As per the predictions, the BPO industry is set to be bringing in over 7 million new jobs and $40 billion in revenue.

Trend 7 – New Outsourcing Destinations to Emerge in 2018

Oversaturation and reduction in business growth in the top 3 outsourcing countries has led businesses to search for alternative cost-effective locations.

Here are the 5 countries that will emerge as new destinations for outsourcing in 2018:

1. Bulgaria

Due to the emergence of cloud computing, Eastern and central Europe has seen a 13% growth in the data center market in 2014. Among eastern European countries, Bulgaria is currently the 12th most desirable outsourcing location in the world.

Bulgaria’s growth as a BPO nation is owed to:

Having the lowest salary amongst EU nations of around 235.62 Euros per month.

Availability of workers speaking all major European languages.

Having a large talent pool of developers with deep technical expertise.

Top BPOs in Bulgaria – HP, IBM, Sutherland Global Services

2. Romania

Romania is currently the fastest growing economy in the EU with 5.7% growth rate. As a result, BPO companies have Romania in their sights for their future expansion. Romania is currently the 13th most desirable outsourcing location in the world.

Skilled labor well-versed in European languages such as French, German, English.

Top BPOs in Egypt – Satyam, Wipro, Sutherland Global Services

4. Mexico

Latin America has seen a 1644.3% growth in internet usage over the last 15 years, hence uncovering a huge talent pool for outsourcing. Mexico is currently the 8th most desirable outsourcing location in the world.

5. Colombia

Despite having the lowest number of bilingual professionals in Latin America, Colombia is currently the 20th most desirable outsourcing location in the world.

Colombia’s growth as a BPO nation is owed to:

Government sponsored technical training.

Minor time zone differences between US/Mexico.

Investment growth due to depreciation of the peso.

Top BPOs in Colombia – Sitel, Convergys, Atlantic International.

Conclusion

The outlook for global outsourcing industry in 2018 is optimistic growth.

Growing competitiveness from new outsourcing destinations coupled with the pressure on businesses to run cost efficiently will be the driving forces behind the accelerated growth in the BPO industry.

While the industry will witness cost-cutting by businesses, it will continue to grow by 6 percent annually for the next six years, according to a report from global property firm Cushman & Wakefield.

Automation will continue to be a major threat to low skilled jobs in the BPO sector. Many of the major outsourcing companies intend to make a 43% investment in robotic automation in the coming two years.

Governments of leading BPO nations will focus on improving education to position itself for rising demands in 2018. To meet such demands, existing BPO employees will be expected to broaden their skill sets.

Startups will also play a key role in the outsourcing sector starting from this year and this tread will continue in 2018. Moreover, the sector will benefit from increased transparency in global outsourcing policies.

Overall, the global outsourcing industry is predicted to reach $262 billion by 2020.

Greg Digneo

Greg Digneo writes for TimeDoctor.com, a time monitoring and productivity monitoring software designed for tracking hours and productivity of remote teams. If you would like to see where you and your team are spending your time during work, then try TimeDoctor free for 30 days.